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River Birch executive Dominick Fazzio leaves the Hale Boggs Federal Building in November 2011, with his wife, Rebecca. A businessman who pleaded guilty Wednesday to tax evasion and conspiracy has become the government's new key witness against Fazzio.
(Photo by The Times-Picayune archive)

"Mr. Ton deeply regrets his role in this conspiracy." -- Kenneth Polite, attorney for Hank Ton

The owner of an oilfield-services firm who is the government's new key witness in the River Birch landfill investigation has pleaded guilty to two relatively minor charges and is ready to testify that he conducted a payroll-fraud scheme with landfill executive Dominick Fazzio, court records show. But Hendrikus "Hank" Ton, who owns or co-owns several Belle Chasse companies servicing oil fields, may not be the only prosecution witness as the government tries to corner Fazzio.

Investigators have also made contact with other employees in Ton's companies who can corroborate Fazzio's involvement in the alleged fraud scheme, according to a source close to the probe.

The government earlier this month accused Fazzio of conspiring with Ton to help Ton's companies evade almost $3.6 million in payroll taxes between 2006 and 2010. Ton was named but not charged in the indictment that charged Fazzio, but sources then confirmed Ton was cooperating with prosecutors.

Indeed, on Wednesday Ton pleaded guilty to one count of conspiracy and one count of willful failure to collect and pay employment taxes, as a result of a plea deal with the government. The deal was filed in court this week, but was signed Oct. 5, a week before prosecutors filed the new charges against Fazzio.

Fazzio has pleaded not guilty and is set for trial Dec. 17. His attorney, Arthur "Buddy" Lemann, said Thursday that his client did nothing more than prepare tax filings based on the data Ton provided.

Ton faces up to 10 years in prison, but maximum penalties are rare for first-time offenders, especially one who is cooperating with the government. His plea agreement will require Ton to repay the full amount of payroll taxes that his firms evaded and to file amended returns for those years.

Ton's attorney, Kenneth Polite, said his client "deeply regrets his role in this conspiracy. By pleading guilty, he accepted responsibility for his own decisions and his own actions." He said Ton told the truth about the facts listed in the government documents laying out the payroll scheme.

U.S. District Judge Jane Triche Milazzo set Ton's sentencing for Jan. 24, 2013, a little more than a month after Fazzio's trial is set to start. Ton was released on a $25,000 bond.

Prosecutors have long set their sights on Fazzio, whom they perceive as a linchpin to the River Birch investigation. As the landfill's chief financial officer, Fazzio is likely to have intimate knowledge of the company's operations, including those involving co-owners Fred Heebe and Jim Ward, who are the probe's top targets. Heebe and Ward haven't been charged and both have denied wrongdoing.

In Lemann's view, Ton's relatively lenient plea deal shows how badly the government wants Fazzio and River Birch.

"The guy who saved himself more than $3.5 million faces no more than 10 years," Lemann said, referring to Ton's maximum possible prison sentence. "But my client, the guy who simply filed the tax returns for fees that totaled no more than $15,000, faces 50 years. It's absurd."

The government documents laying out Ton's crimes echo the accusations made in Fazzio's Oct. 11 indictment. Prosecutors alleged that Fazzio prepared tax filings for Abe's Boat Rentals, Gulf Wells Inc., Heather Marine and B&H Marine Transportation Services, firms that Ton owns or co-owns. The companies employed about 100 people as recently as 2009.

Fazzio's indictment accused him of conspiring with Ton to pay some employees under the table to hide their true income and reduce the company's payroll-tax obligation. The document said Ton paid the workers from a bank account under Heather Marine, a firm that had remained dormant since 1998. In turn, Fazzio "knowingly and willfully" omitted those wages in tax filings for the other Ton firms.

Lemann said his client used the records from the accounting system set up by Ton and that Fazzio "never saw any document indicating to him that (Ton) wasn't withholding what he was supposed to withhold in taxes."

A summary of the case against Ton, signed by Ton, said Fazzio "advised" him to use the Heather Marine account "in order to conceal these salaries." The document also said Fazzio "further advised Ton" to transfer profits from the other companies to Heather Marine. To hide the transfers, Fazzio deducted them as the cost of goods in the tax filings of the remaining Ton firms.

Polite said IRS investigators first approached Ton inquiring about the scheme a few months ago, and that Ton considered a plea from the start.

The two sides negotiated that plea over the summer and the government quietly filed a bill of information charging Ton late last week, which led to Ton making his initial court appearance and pleading guilty on Wednesday.

Usually, the filing of criminal charges and a subsequent guilty plea are prime opportunities for prosecutors to publicly trumpet their progress in an investigation.

But U.S. Attorney Jim Letten recused his office from the River Birch probe earlier this year, following the revelation that former prosecutor Sal Perricone had been posting intemperate anonymous rants about some of the probe's targets. The Washington attorneys from the Justice Department who took over the investigation have declined to make any public comment on the case.